A wireless world: Motorola is banking on the overseas cell phone market

Black Enterprise, Oct, 1996 by Juliette Fairley

While some people in emerging nations may not be able to buy a standard telephone, there's nothing stopping them from acquiring cellular phones. In fact, Motorola Inc., of Schaumburg, Illinois, is hoping to capitalize on this trend as it steadily builds up its overseas operations.

One of the world's leading providers of wireless communications, semiconductors and advanced dectronics systems and services, Motorola (NYSE: MOT) was selected as a stock pick in October 1995 by PaineWebber stockbroker Gwen Salley. Although the stock dropped from $75 1/2 to $65 1/2 in a year's time, Salley considers it worth buying and holding. Readers who bought $1,000 worth of Motorola stock last October (14 shares at $75) would have lost about $100.

However, now isn't the time to sell. Instead, hold on to the stock until it climbs back up, Sally advises. "The company is well positioned in the overseas market, which accounted for around 70% of its wireless revenues. These markets are expanding faster than the U.S. market."

The company reported sales of $7 billion in the first quarter of 1996, up 16% from last year. Earnings were $384 million compared with $372 million a year earlier. But by the second quarter, Motorola's net income had fallen by 32.2% to $326 million or 54 cents a share, due to weak sales of semiconductors and handsets for cellular telephones. This was well short of earnings of 69 cents predicted by analysts.

Despite a gloomy short-term Wall Street sales forecast, Motorola vice chairman and CEO Gary Tooker declares that new products and diverse technologies are setting the stage for Motorola's sustained long-term growth and bid for global leadership. "Motorola should benefit from the tremendous long-term pent-up demand for wireless communications and advanced electronics throughout the developing world."

In May 1996, the company signed a $100 million deal with a Czech Republic company, Radiomobil, to provide technology for a global mobile phone network. Motorola's Cellular Infrastructure Group also deployed the first wireless telephone network, the Wireless Local Loop in Benin, Africa. The company says that for many of these remote customers, this fixed wireless system provides their first telephone service.

Among other new product developments, the company announced in June that it was jointly building a $1.5 billion semiconductor plant in Richmond, Virginia, with Siemens Semiconductor Group. The plant will begin manufacturing 64-megabit dynamic random access memory chips in mid-1998.